Policy 2711: Formation and Oversight of Legal Entities
Subject Area: Miscellaneous
Responsible Office: Office of Legal Counsel
Sponsor: Chief Financial Officer & Vice President & General Counsel
Originally Issued: August 1, 2012
Refer Questions To: Office of Legal Counsel
Purpose: To establish a policy for the formation and oversight of legal entities by the University.
The breadth of the activities taking place in the University sometimes makes it appropriate to establish a separate legal entity to facilitate those activities. At the same time, the creation and maintenance of legal entities create substantial costs and ongoing administrative and compliance obligations. In general, activities that are consistent with the University’s or an existing University-related organization’s mission and status as a charitable organization should be conducted through the University or an existing related organization. This Policy creates a decision-making process for the establishment of a new legal entity at the University when the activity is not believed to be appropriate for pursuit through the University or an existing University-related organization. [Note: The Office of Legal Counsel’s website includes a memorandum describing the considerations favoring and disfavoring the establishment of separate legal entities. Seehttp://legalcounsel.uchicago.edu/page/selected-policies-and-resources.
1. No new legal entity may be formed without the approval of the Executive Committee of the University’s Board of Trustees.
2. Any division, school, center, office or other unit of the University seeking the establishment of a new legal entity must prepare a written proposal for the establishment of the entity. The proposal should emphasize the purposes of the entity and its connection to the University and its mission (if any), and should include a 5 year budget and basic business plan.
3. The proposal must be reviewed and endorsed by the Dean or Director of the unit involved, or by a University officer. The proposal should suggest a University senior administrator, typically an officer, who would have ultimate administrative responsibility for the entity and its activities. The proposal should be submitted to the Chief Financial Officer and to the Vice President and General Counsel, who are charged with reviewing the proposal. The Chief Financial Officer and the Vice President and General Counsel may consult with the President and Provost as appropriate, and involve other personnel, offices or units of the University in the review of proposals as necessary.
4. The Chief Financial Officer and the Vice President and General Counsel may waive the proposal and plan requirements in paragraph 2 above where no substantial purpose would be served by those requirements (e.g., where the entity is being formed solely as a holding company that will not have any employees or day-to-day operations).
5. If the Chief Financial Officer and the Vice President and General Counsel determine that the formation of a new legal entity is justified, they will identify a senior administrator, typically an officer, who will have ultimate administrative responsibility for the entity and its activities, and will recommend the formation of the new entity to the Executive Committee of the Board of Trustees. No new legal entity will be formed without the approval of the Executive Committee of the University’s Board of Trustees.
6. Any change to a legal entity affecting its governance or relationship to the University, including a decision to dissolve the entity, and any decision that would bring an entity not previously controlled by the University under the University’s control, must be reviewed and approved in advance by the Chief Financial Officer and the Vice President and General Counsel, who may determine that approval of the Executive Committee of the University’s Board of Trustees is required. The senior administrator designated as having ultimate administrative responsibility for the entity should review the entity every 5 years to confirm that its continued existence as a separate entity is appropriate and serving important University interests.